Hungary and Slovakia link their gas grids

Hungary and Slovakia linked their natural gas pipeline networks yesterday (27 March) as part of European Union efforts to strengthen supply security in a region of the bloc that relies heavily on imports from Russia.

The connection of the two grids in the Hungarian town of Szada, 28 km northeast of Budapest, will allow flows to be reversed so that Hungary, rather than import gas from Russia, can bring it from alternative sources in Europe.

A new 111 km pipeline with annual capacity of about 5 billion cubic metres a year (bcm/y), stretching from the Hungarian town of Vecses to Velke Zlievce in Slovakia, is due to become operational from 2015.

Hungary, which imports about 80% of its gas from Russia and the Hungary-Slovak interconnector, is part of the North-South Corridor, an EU project aimed at reducing dependence on eastern imports.

"This pipeline creates the opportunity for us to import gas from outside Russia in future," Hungary's Prime Minister Viktor Orbán told a news conference, also addressed by his Slovak counterpart Robert Fico, at a construction site.

The Slovak transmission system's operator, Eustream, said on Thursday it had completed Slovakia's section of the pipeline, which was already filled with gas at operating pressure.

The countries expect to start testing the new interconnector in July, Fico said.

Eustream said that in the future, the interconnector would give Slovakia access to a liquefied natural gas (LNG) import terminal in Croatia.

"It will provide Slovakia with access to the planned southern gas corridor or LNG terminal in Croatia. Hungary will get a new approach to the West European gas networks," Eustream said in a statement.

Moscow-Kyiv dispute

Building new links and upgrading infrastructure gained renewed focus in the EU, following a contract dispute between Moscow and Kyiv in 2009 that stopped gas flows via Ukraine to much of central and southeastern Europe in the middle of winter.

Central and eastern European countries, including the Czech Republic, Slovakia, Poland and Austria have all made recent strides to build new gas links with each other.

For now, the chief supply security advantage is that the completed section of the future corridor will allow Russian gas to be imported via different routes, as it cannot, as yet, be used to link to alternative suppliers.

"The security (of supply) aspect is the most important, as this pipeline gives additional access to Russian gas," said Tamas Pletser, analyst at Erste Bank in Budapest. "At this moment, it does not lead to diversification of our imports."

However, a Polish-Slovak link with a capacity of up to 5 billion bcm/y will be completed in 2017 as part of an eventual proposed pipeline stretching from northern Poland to Croatia.

This would access supply both from Poland's new LNG terminal on the Baltic and the planned LNG terminal on Croatia's island of Krk.

Background

The 20-21 March EU summit tasked the European Commission to come up with a plan for decreasing the Union’s energy dependence from Russia., in the wake of the Crimea crisis.

At the summit, Council President Herman Van Rompuy also spoke of the need for more national and regional gas interconnectors to be built, specifying that those should include the Iberian peninsula and the Mediterranean area. He also spoke of the need of solidarity in case of energy disruptions, and developing interconnectors with third countries, where relevant [more].

Russia scrapped the South Stream pipeline project to supply gas to southern Europe, without crossing Ukraine, on Monday (December 1), citing EU objections, and instead named Turkey as its preferred partner for an alternative pipeline, with a promise of hefty discounts.

Slovak Prime Minister Robert Fico called for talks with Ukraine, Russia and the European Commission to ensure his country gets paid and that it can reverse gas flows to Kyiv without violating existing contracts, while Hungary said it could do so at once.

Slovakia could seek compensation from the European Union on potential losses from replacing what it says is a shortfall in deliveries requested from its main supplier Russia over the past month, an economy ministry spokeswoman said on Monday.

Thwarted in one attempt to build a gas pipeline to southeast Europe, the Kremlin is working with a small circle of allies to lay the groundwork for an alternative that would help it maintain leverage in its rivalry with the West, write Krisztina Than and Michael Kahn.

Spain's sophisticated gas infrastructure could help Europe reduce its dependence on Russian supplies once projects to pump gas across the Pyrenees become a reality, the head of a Spanish gas association said yesterday (27 March).

Russia reiterated its threat to stop supplying Ukraine with natural gas on Monday (May 12) if Kyiv does not pay in advance for June deliveries, and said further talks on the issue were also contingent on payment.

Russian oil giant Gazprom has slapped Ukraine energy firm Naftogaz Tursday (24 April) with an additional $11.4 billion gas bill, more than five times its previous claim, increasing pressure on Kyiv, amid the deepest East-West rift since the end of the Cold War.

EU Energy Commissioner Günther Oettinger said today (2 May) that the EU wants a uniform price for Russian gas for all its member states, adding Europe's common gas infrastructure should include Ukraine, Georgia and the western Balkans.